Spotlight to intensify on B&B

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Babcock & Brown executive director Jim Fantaci, responsible for almost a quarter of the bank's $424 million in net revenue, has managed to stay out of the limelight for 24 years.

He is one of only three executive directors at the investment bank and in charge of its US interests and operating leasing. Mr Fantaci has kept a low profile, happy to let Jim Babcock be the face of the bank.

But as the hype fades from B&B's hugely successful trading debut last week, Mr Fantaci and other executives will come under increased scrutiny from investors keen to assess whether the bank can emulate the success of its bigger peer, Macquarie Bank.

B&B's operating leasing will also come under the microscope as it represents one of the key points of difference between it and Macquarie. Operating leasing alone makes up 23 per cent of B&B's revenue.

Mr Fantaci joined B&B in 1982, five years after it was founded by Mr Babcock and George Brown, with whom he had worked at Matrix Leasing International. When he joined, there were seven staff and an office. Today, it has 440 staff and 19 offices.

Mr Brown left the bank in 1986, leaving Mr Fantaci as one of the most senior executives.

B&B's operating leasing business works by buying assets such as planes, rail cars and electronic equipment and fixing them up or renegotiating leases so they generate higher returns.

Mr Fantaci said B&B bought $500 million of aircraft and up to $300 million of rail cars a year and sold them on to financial investors. Aircraft assets were sold mainly into the Japanese market and rail assets to European institutional investors. B&B earns fees for managing the assets and is responsible for a portfolio of more than $4.4 billion.

Mr Fantaci said management fees had grown "considerably" in the past three years, and now accounted for about 15 per cent of the division's revenue.

B&B's operating leasing business is focused in the European and North American markets, but Mr Fantaci says the bank is also interested in Australia.

Analysts' concern with B&B's operating leasing business is that its results are lumpy. In 2002, the division's aircraft business was hit by the downturn in the aviation industry following the September 11 terrorist attacks. But that was offset by a 25 per cent increase in revenue for the rail business because of profits from asset sales. Last year, the airline industry was still weak because of the war in Iraq and revenues from rail were down because of a reduction in asset sales.

But Mr Fantaci is optimistic about the division's growth prospects. It is forecast to bring in net revenue of $123 million next year, up from $102 million this year.

About 10 to 15 per cent of the $523 million in capital raised from last week's float was earmarked for the business, he said.